Internet giant Yahoo has apparently changed its mind about spinning off its valuable stake in China’s Alibaba, and will instead spin off its core internet properties, including its stake in Yahoo Japan.
CNBC first reported the story on Tuesday evening, citing sources with knowledge of the matter. Moving forward, Yahoo will likely spin off its core business and its stake in Yahoo Japan, both of which it could do with much lower risk of tax liability according to analysts and media sources.
Yahoo’s board recently met for a marathon three-day session, and apparently heard a presentation from Starboard Value, a major investor lobbying to stop the planned spin off of a 15% stake in Alibaba and go ahead and sell off assets.
Yahoo spokespersons and senior management had no comment on this developing story.
Of Interest, Yahoo shares have moved up close to 3% in pre-market trading Wednesday at close to $36 per share.. The stock was up up 0.49% on Tuesday, closing at $34.85.
More on Yahoo change of heart
The general analyst consensus is that the firm’s core business (advertising and search technology, and an impressive content library and production system) is likely worth somewhere in the range of $6.5 billion to $8 billion.
Keep in mind that according to company data, the firm’s properties, including the very popular Yahoo Sports and Tumblr, are visited by over billion active users each month, and more than 600 million of those visitors are using mobile devices.
The decision to back off from the Alibaba spinoff is “a positive and defining moment for the company,” SunTrust Robinson Humphreys Internet equity analyst Robert Peck commented in an interview. “The board is responding to the possible tax risk and is ultimately seeking “to optimize the company’s structure and seek to maximize value,” he noted. “I like the fact that they realized that.”
CEO Marissa Mayer came on board more than three years ago to turn the internet giant around, and she did not hold back from buying assets and talent as part of that process. That said, the turnaround has been bumpy and expensive, which has resulted in several major shareholders urging management to consider other alternatives to unlock value.